All Publicity is Good Publicity if You’re Bill Ackman

January 31, 2014 48 sec read

John Hempton at Bronte Capital (see his blogs here) is going to some lengths to stir up a scandal concerning letters that were authored (or not authored, as it were) by U.S. Senator Edward Markey. In the letters (sent to the SEC and other government agencies), Senator Markey seeks information about a company called Herbalife, and expresses his supposed concerns that Herbalife is engaged in wrong-doing.

Since the senator’s concerns about Herbalife are similar to the concerns that have been expressed by hedge fund manager Bill Ackman, and since the senator’s letters seem to have been created on Bill Ackman’s computer, Hempton theorizes that Ackman has captured a U.S. senator, and that Ackman was even able to ghostwrite the senator’s letters about Herbalife and profit from the damage that the letters caused to Herbalife’s stock price.

Far be it from us at DeepCapture to argue with that theory, but it could also be that both Ackman and Hempton (who, like Ackman, is short selling Herbalife stock) are themeselves keen to advertise this “scandal” so as to reinforce the perception that Ackman’s superpowers are such that not just stocks, but also senators follow his commands. Superpowers are all the more super for there being (from the point of view of our captured media) no scandal at all.

Jan 31 (Reuters) – Two Florida State University professors who specialize in financial markets and physics will pay more than $670,000 to settle civil charges that they carried out an illegal short-selling scheme using an elaborate options strategy, U.S. regulators said on Friday.

Gonul Colak and Milen Kostov settled with the Securities and Exchange Commission without admitting or denying the charges.

The SEC said the pair of researchers illegally reaped $420,000 through a complicated “naked” short-selling strategy in 20 different companies, including Sears Holding Corp and LinkedIn, among others.

Short-selling itself is not illegal.

In a short-sale, a trader borrows stock and then sells it at a lower price to turn a profit. SEC rules require that the securities must be repurchased within three days of the sale.

But the SEC said the professors engaged in illegal “naked” short-selling, in which they never actually borrowed the securities and failed to deliver them.

In this particular case, the SEC alleges the two engaged in so-called “sham transactions designed to perpetuate a naked short position.”

Their alleged scam made it appear as though they had actually delivered securities, when in fact they were maintaining naked short positions and profiting from them. But Ross Albert, an attorney for Colak, said his client disagreed with the way the SEC characterized his trading strategy.

“This was a market neutral trading program,” Albert said. “His program was based on the notion of arbitrage and would make a profit whether the price of the underlying stock went up or down.”

“In his mind, the rolling over of these short positions was legal,” he added, saying his client was pleased to have resolved the case.

Kostov, 40, who represented himself in the case, could not be reached for comment. He has not worked at Florida State University since 2012, a school spokeswoman said.

She said Colak, 39, was still employed as an assistant professor in the university’s department of finance.

The SEC in recent years has ramped up its focus on bringing naked short-selling cases.

In one prominent case, an SEC administrative law judge last year ordered optionsXpress – now owned by Charles Schwab – its former chief financial officer and a customer to pay $4.8 million in fines and return $4.2 million in connection with alleged illegal short-selling.

The SEC also charged the Chicago Board Options Exchange with failing to police for short-selling abuses in connection with the optionsXpress matter, and the exchange agreed to pay a $6 million penalty.

eh you who thinks by posting anonymously no one would ever think it’s you the great pretender, defender of your own speech that banned another makes for a hypocrite. Issues brought to your attention concerning misrepresentations made have yet to be corrected,isn’t that right? shall we discuss it here on Deepcapture instead of the board where it’s happening because I assume you’ll just ban again to avoid the truth without any ethical remorse considering all bans have since been lifted! folks floyd has been touting asensio research reports the last couple of months. research reports are what got asensio booted from the industry. asensio website makes reference to 60 information inquires. asensio refused to answer inquires, even walked out of the interview so Nasdaq kicked him to the curb. While reading about his Nasdaq interview I was left thinking who conducts themselves in such a manner with a governing entity? FINRA and SEC have reaffirmed Nasdaq ruling to protect investors. Heck asensio first answered a Nasdaq interview question that he didn’t write the research reports, so who did? All efforts made by asensio to be reinstated have failed from what I can gather upon looking yet his old reports are being touted. Floyd acts like he protects the markets despite having been the defendant in numerous defamation cases petitioned by companies. Pumping an industry rule breaker and having banned discussion upon mention of the elgindy/exFBIroyer indictment makes for intrique and a question of why was it so important to supress. It’s actually a very interesting story, isn’t it floyd?

“Far be it from us at DeepCapture to argue with that theory, but it could also be that both Ackman and Hempton (who, like Ackman, is short selling Herbalife stock) are themeselves keen to advertise this “scandal” so as to reinforce the perception that Ackman’s superpowers are such that not just stocks, but also senators follow his commands. Superpowers are all the more super for there being (from the point of view of our captured media) no scandal at all.”

Juice In The New Herbalife Convertible: A Hidden Short Squeeze
Forbes
While Ackman has announced that he has reconfigured his bet against the company from a naked short position to put options to limit his …

2/03/2014 @ 10:41AM
…Icahn, who criticized Ackman for trying to improve short-term performance by publicizing his Herbalife trade, thought that Ackman had ultimately made a strategic blunder by exposing his position to the world, enabling other deep-pocketed activists like Icahn and Third Point’s Dan Loeb to force the shares higher…
…While Ackman has announced that he has reconfigured his bet against the company from a naked short position to put options to limit his potential losses, it’s important to remember that even if a major short view gets expressed via put options, someone has to bear the risk of the stock’s theoretically unlimited upside….

…The Federal Bureau of Investigation’s probe of SAC and Mr. Cohen remains active, according to a person briefed on the matter. Agents are looking into allegations of insider trading, including instances that haven’t been made public, the person said…
opps meant to highlight that point in my previous post per Wall Street Journal

Statement Of Manhattan U.S. Attorney Preet Bharara
On The Conviction Of Mathew Martoma
FOR IMMEDIATE RELEASEThursday, February 6, 2014 “As the jury unanimously found, Mathew Martoma cultivated and purchased the confidence of doctors with secret knowledge of an experimental Alzheimer’s drug, and used it to engage in illegal insider trading. Martoma bought the answer sheet before the exam – more than once – netting a quarter billion dollars in profits and losses avoided for SAC, as well as a $9 million bonus for him. In the short run, cheating may have been profitable for Martoma, but in the end, it made him a convicted felon, and likely will result in the forfeiture of his illegal windfall and the loss of his liberty. Mathew Martoma becomes the 79th person convicted of insider trading after trial or by guilty plea in this District in the last four years.”